The Ripple Effect
Second generation chemical industry
IHS Chemical says investments will drive chemical exports from the Middle East and will help the chemical industry grow faster than other key industries in the region. China will be the biggest market for these Middle East exports, which will grow by more than 8 percent year-on-year in 2016, representing an increase of more than 6 percent growth above 2013 chemical export figures.
“We are witnessing the beginning of the ‘second generation’ of the Middle East chemical industry,” said Dave Witte, general manager of IHS Chemical and senior vice president at IHS. “The Middle East continues to be a dominant force in petrochemical production. The region faces an opportunity to pivot to strategies that leverage their growing technological expertise, expand their global footprint and seize upon commercial advantages. Additionally, this new era enables Middle East producers to continue building on their leading position in commodity production and expand into intermediates and higher-value products.”
Added Witte: “For the Middle East refining and petrochemical industry, a changing global feedstock mix – combined with increasing competition in the US driven by the availability of cheaper [natural] gas feedstock – are reinforcing previous decisions by Middle East petrochemical producers to continue investing in new technology. The industry is also diversifying its feedback mix and expanding its product slates to include more higher-value intermediates.”
Private power development
To meet the region’s high growth in power demand, IHS forecasts a need for $350 billion in new investment for generation between now and 2030, said Andy Barrett, senior global gas and power advisor at IHS. “This is forecast mainly to build new gas-fired capacity but expected tightness in domestic gas availability in many countries is driving diversification to other fuels and technologies, including clean coal, nuclear and renewables,” he said.
Recently announced aggressive renewables targets for several countries are unlikely to prove achievable, Barrett noted, but “IHS predicts that around $50 billion of the new investment will be required to develop around 17 GW of (mainly solar) renewable generation. In terms of opportunities for private power development (IPPs) the region should prove to be the most attractive in the world.”
The GCC is expected to add 1.5 million barrels per day of crude-topping capacity from ambitious refining projects. According to Farrah Boularas, senior researcher at IHS Energy: “Announced refining and related facilities in the GCC are estimated to exceed $80 billion of cumulative investment through 2020. While not all plans will reach the execution stage, a number have already broken ground.”
Between 2014 and 2020, IHS expects crude distillation and condensate-splitting capacity additions will increase regional output by around 1.5 million barrels per day. In addition, desulfurization capacity will also increase substantially as countries such as Saudi Arabia and Kuwait invest heavily in clean fuel projects, enabling production of motor fuels aligned with Euro V specifications.
Said Boularas: “GCC refiners that are able to complete their projects will therefore intensify competition in supplying Europe and Africa, potentially to the detriment of refiners in Europe, the former Soviet Union, India and Asia.”